Relationship between budget deficit and trade deficit in Vietnam: The role of vehicle money

Abstract

Budget deficit and trade deficit are two large macro balances, which are decisive to the stability and sustainable development of countries. To control these two balances, it is necessary to understand the nature of the relationship, the direction of impact, and the transmission mechanism in the relationship between the two balances. The period 2005- 2021 was a period when the economy of Vietnam and the world had many great changes, causing the Vietnamese government to use a lot and constantly change macroeconomic policy responses related to the fiscal sector. and trade to run the economy. The transmission channels of this relationship are very diverse, which can be macroeconomic variables but also non-economic variables. Since then, the author has compared, synthesized and selected 5 research variables for Vietnam on the basis of Mundel-Flemming model, which uses a combination of VAR (symmetric) and NARDL (asymmetrical) worthy). Determining the type of relationship: In the period 2005-2021, there was no double deficit in Vietnam. The relationship identified is a two-way, inverse interaction in both the short run and the long run with both symmetry and asymmetry. Determining transmission channels: Interest rates and GDP are impact transmission channels (from trade to budget). While in the opposite direction (budget to trade) is GDP and exchange rate. however, the impact through the transmission channel is only in the short term, and in the long term these are direct impacts. Determine the impact of control variables on 2 balances: Both balances are affected simultaneously by many macro variables in both the short run and the long run. The implementation of exchange rate adjustment can only directly change the trade balance in the short and long term.Monetary policy that focuses on interest rate changes affects trade in the long run, but only affects the budget in the short term. The income factor affects only trade in the long run but affects both trade and the budget in the short term. Exchange rates affect both budget and trade in the short and long run. The relationship between the variables is largely asymmetric.